TITLE IV--STUDENT ASSISTANCE

PART G--GENERAL PROVISIONS

SEC. 485. INSTITUTIONAL REFUNDS.

Section 484B (20 U.S.C. 1091b) is amended to read as follows:

`SEC. 484B. INSTITUTIONAL REFUNDS.

`(a) RETURN OF TITLE IV FUNDS-

`(1) IN GENERAL- If a recipient of assistance under this title withdraws from an institution during a payment period or period of enrollment in which the recipient began attendance, the amount of grant or loan assistance (other than assistance received under part C) to be returned to the title IV programs is calculated according to paragraph (3) and returned in accordance with subsection (b).

`(2) LEAVE OF ABSENCE-

`(A) LEAVE NOT TREATED AS WITHDRAWAL- In the case of a student who takes a leave of absence from an institution for not more than a total of 180 days in any 12-month period, the institution may consider the student as not having withdrawn from the institution during the leave of absence, and not calculate the amount of grant and loan assistance provided under this title that is to be returned in accordance with this section if--

`(i) the institution has a formal policy regarding leaves of absence;

`(ii) the student followed the institution's policy in requesting a leave of absence; and

`(iii) the institution approved the student's request in accordance with the institution's policy.

`(B) CONSEQUENCES OF FAILURE TO RETURN- If a student does not return to the institution at the expiration of an approved leave of absence that meets the requirements of subparagraph (A), the institution shall calculate the amount of grant and loan assistance provided under this title that is to be returned in accordance with this section based on the day the student withdrew (as determined under subsection (c)).

`(3) CALCULATION OF AMOUNT OF TITLE IV ASSISTANCE EARNED-

`(A) IN GENERAL- The amount of grant or loan assistance under this title that is earned by the recipient for purposes of this section is calculated by--

`(i) determining the percentage of grant and loan assistance under this title that has been earned by the student, as described in subparagraph (B); and

`(ii) applying such percentage to the total amount of such grant and loan assistance that was disbursed (and that could have been disbursed) to the student, or on the student's behalf, for the payment period or period of enrollment for which the assistance was awarded, as of the day the student withdrew.

`(B) PERCENTAGE EARNED- For purposes of subparagraph (A)(i), the percentage of grant or loan assistance under this title that has been earned by the student is--

`(i) equal to the percentage of the payment period or period of enrollment for which assistance was awarded that was completed (as determined in accordance with subsection (d)) as of the day the student withdrew, provided that such date occurs on or before the completion of 60 percent of the payment period or period of enrollment; or

`(ii) 100 percent, if the day the student withdrew occurs after the student has completed 60 percent of the payment period or period of enrollment.

`(C) PERCENTAGE AND AMOUNT NOT EARNED- For purposes of subsection (b), the amount of grant and loan assistance awarded under this title that has not been earned by the student shall be calculated by--

`(i) determining the complement of the percentage of grant or loan assistance under this title that has been earned by the student described in subparagraph (B); and

`(ii) applying the percentage determined under clause (i) to the total amount of such grant and loan assistance that was disbursed (and that could have been disbursed) to the student, or on the student's behalf, for the payment period or period of enrollment, as of the day the student withdrew.

`(4) DIFFERENCES BETWEEN AMOUNTS EARNED AND AMOUNTS RECEIVED-

`(A) IN GENERAL- If the student has received less grant or loan assistance than the amount earned as calculated under subparagraph (A) of paragraph (3), the institution of higher education shall comply with the procedures for late disbursement specified by the Secretary in regulations.

`(B) RETURN- If the student has received more grant or loan assistance than the amount earned as calculated under paragraph (3)(A), the unearned funds shall be returned by the institution or the student, or both, as may be required under paragraphs (1) and (2) of subsection (b), to the programs under this title in the order specified in subsection (b)(3).

`(b) RETURN OF TITLE IV PROGRAM FUNDS-

`(1) RESPONSIBILITY OF THE INSTITUTION- The institution shall return, in the order specified in paragraph (3), the lesser of--

`(A) the amount of grant and loan assistance awarded under this title that has not been earned by the student, as calculated under subsection (a)(3)(C); or

`(B) an amount equal to--

`(i) the total institutional charges incurred by the student for the payment period or period of enrollment for which such assistance was awarded; multiplied by

`(ii) the percentage of grant and loan assistance awarded under this title that has not been earned by the student, as described in subsection (a)(3)(C)(i).

`(2) RESPONSIBILITY OF THE STUDENT-

`(A) IN GENERAL- The student shall return assistance that has not been earned by the student as described in subsection (a)(3)(C)(ii) in the order specified in paragraph (3) minus the amount the institution is required to return under paragraph (1).

`(B) SPECIAL RULE- The student (or parent in the case of funds due to a loan borrowed by a parent under part B or D) shall return or repay, as appropriate, the amount determined under subparagraph (A) to--

`(i) a loan program under this title in accordance with the terms of the loan; and

`(ii) a grant program under this title, as an overpayment of such grant and shall be subject to--

`(I) repayment arrangements satisfactory to the institution; or

`(II) overpayment collection procedures prescribed by the Secretary.

`(C) REQUIREMENT- Notwithstanding subparagraphs (A) and (B), a student shall not be required to return 50 percent of the grant assistance received by the student under this title, for a payment period or period of enrollment, that is the responsibility of the student to repay under this section.

`(3) ORDER OF RETURN OF TITLE IV FUNDS-

`(A) IN GENERAL- Excess funds returned by the institution or the student, as appropriate, in accordance with paragraph (1) or (2), respectively, shall be credited to outstanding balances on loans made under this title to the student or on behalf of the student for the payment period or period of enrollment for which a return of funds is required. Such excess funds shall be credited in the following order:

`(i) To outstanding balances on loans made under section 428H for the payment period or period of enrollment for which a return of funds is required.

`(ii) To outstanding balances on loans made under section 428 for the payment period or period of enrollment for which a return of funds is required.

`(iii) To outstanding balances on unsubsidized loans (other than parent loans) made under part D for the payment period or period of enrollment for which a return of funds is required.

`(iv) To outstanding balances on subsidized loans made under part D for the payment period or period of enrollment for which a return of funds is required.

`(v) To outstanding balances on loans made under part E for the payment period or period of enrollment for which a return of funds is required.

`(vi) To outstanding balances on loans made under section 428B for the payment period or period of enrollment for which a return of funds is required.

`(vii) To outstanding balances on parent loans made under part D for the payment period or period of enrollment for which a return of funds is required.

`(B) REMAINING EXCESSES- If excess funds remain after repaying all outstanding loan amounts, the remaining excess shall be credited in the following order:

`(i) To awards under subpart 1 of part A for the payment period or period of enrollment for which a return of funds is required.

`(ii) To awards under subpart 3 of part A for the payment period or period of enrollment for which a return of funds is required.

`(iii) To other assistance awarded under this title for which a return of funds is required.

`(c) WITHDRAWAL DATE-

`(1) IN GENERAL- In this section, the term `day the student withdrew'--

`(A) is the date that the institution determines--

`(i) the student began the withdrawal process prescribed by the institution;

`(ii) the student otherwise provided official notification to the institution of the intent to withdraw; or

`(iii) in the case of a student who does not begin the withdrawal process or otherwise notify the institution of the intent to withdraw, the date that is the mid-point of the payment period for which assistance under this title was disbursed or a later date documented by the institution; or

`(B) for institutions required to take attendance, is determined by the institution from such attendance records.

`(2) SPECIAL RULE- Notwithstanding paragraph (1), if the institution determines that a student did not begin the withdrawal process, or otherwise notify the institution of the intent to withdraw, due to illness, accident, grievous personal loss, or other such circumstances beyond the student's control, the institution may determine the appropriate withdrawal date.

`(d) PERCENTAGE OF THE PAYMENT PERIOD OR PERIOD OF ENROLLMENT COMPLETED- For purposes of subsection (a)(3)(B)(i), the percentage of the payment period or period of enrollment for which assistance was awarded that was completed, is determined--

`(1) in the case of a program that is measured in credit hours, by dividing the total number of calendar days comprising the payment period or period of enrollment for which assistance is awarded into the number of calendar days completed in that period as of the day the student withdrew; and

`(2) in the case of a program that is measured in clock hours, by dividing the total number of clock hours comprising the payment period or period of enrollment for which assistance is awarded into the number of clock hours--

`(A) completed by the student in that period as of the day the student withdrew; or

`(B) scheduled to be completed as of the day the student withdrew, if the clock hours completed in the period are not less than a percentage, to be determined by the Secretary in regulations, of the hours that were scheduled to be completed by the student in the period.

`(e) EFFECTIVE DATE- The provisions of this section shall take effect 2 years after the date of enactment of the Higher Education Amendments of 1998. An institution of higher education may choose to implement such provisions prior to that date.'.